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GDP growth in Q3 likely to stay flat at 4.5 per cent: Economists

India’s economic growth slipped to a 26-quarter low of 4.5% in July-September from 5% in the first quarter. The statistics office lowered the FY19 GDP growth rate to 6.1% from the provisional estimate of 6.8% and has forecast 5% growth in FY20, its slowest pace in 11 years.

, ET Bureau|
Last Updated: Feb 27, 2020, 07.23 AM IST
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The Reserve Bank of India has cut policy rates by 135 bps since February, 2019.
NEW DELHI: India’s economy is likely to have grown at the same pace as in the third quarter at 4.5%, most independent economists said, though others expect growth to be a tad faster, based on a slight pickup in agriculture and government spending.

“Our composite leading indicator (index of 33 major leading indicators) suggests that gross domestic product growth to remain flat at 4.5% as in Q3 of FY20,” said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India.

India’s economic growth slipped to a 26-quarter low of 4.5% in July-September from 5% in the first quarter.

The statistics office lowered the FY19 GDP growth rate to 6.1% from the provisional estimate of 6.8% and has forecast 5% growth in FY20, its slowest pace in 11 years. The Economic Survey 2020 sees a recovery to 6-6.5% in FY21. “We were earlier anticipating a downward revision in FY20 growth rate from 5% to 4.6%,” Ghosh said.

This downward revision, as per Ghosh, will have statistical benefits as it could push up FY20 GDP to 4.7%. “There is not much improvement. We have retained our full year GDP target at 4.7%,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank.

Manufacturing activity is likely to remain pressured and unlikely to better the 6.4% growth in the corresponding period the year ago. Falling growth seen in sales of commercial vehicles, railway freight traffic and cargo handled by civil aviation has also contributed to the projection being significantly lower. “There is no joy in the GDP story. Consumption could be slightly better because of PM-KISAN but there is no systematic improvement anywhere,” said IDFC First Bank chief economist Indranil Pan.
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The Reserve Bank of India has cut policy rates by 135 bps since February, 2019, and the government reduced corporate rate tax to 22% in order to attract investment and boost growth.

Despite these steps, indicators available till the quarter ended December, 2019, are not particularly robust, said Madan Sabnavis, chief economist at CARE Ratings.

“The sharp decline in October and November seems to have been reversed in December,” said Devendra Kumar Pant, chief economist at India Ratings.

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